Michigan Tobacco Tax Information Guide - for Licensees, Retailers and Others - August 2019 Prepared by - State of Michigan
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Michigan Tobacco Tax
Information Guide
for Licensees, Retailers and Others
August 2019
Prepared by
DISCLAIMER: This Tobacco Tax Information Guide is intended to provide tobacco product retailers, tobacco tax licensees and others with a general background on the Michigan tobacco tax by summarizing the requirements under the Tobacco Products Tax Act (TPTA). It is not intended to be exhaustive and does not constitute a Revenue Administrative Bulletin or a Letter Ruling. While every attempt has been made to ensure accuracy, new legislation, regulations, court decisions, notices, and announcements could affect the accuracy of this Information Guide. Please be aware Treasury's interpretation of the law may change because of legislation, court cases and other events. Please monitor Treasury's website and other authoritative sources for changes that may affect the tobacco tax.
Table of Contents
Introduction.................................................................................................................. 5
Tax Rates........................................................................................................................ 5
LICENSEE SECTION
will be found Tobacco Products Tax Returns and Filing Requirements.................................... 6
Defined terms
in BOLD AL
L CAPS the Payments........................................................................................................................ 7
appear in this Payment Deadlines....................................................................................................... 7
first time they
nitions are in Licensing Requirement, License Types, License Fees.........................................7-8
document. Defi s
Terms on page Stamps, OTP Markings and Shipping Labels..................................................... 8-10
the Glossar y of
Cigarettes.................................................................................................................. 8
26-28.
Non-Cigarette Tobacco Products (OTP)........................................................... 9
Vending Machine Disc or Marker...................................................................... 10
Administrative Inspections of Licensees............................................................... 11
Contraband............................................................................................................. 12
Recordkeeping Requirements........................................................................... 12-14.
Invoices and Other Records (General)............................................................ 12
Invoices and Other Records (Vending Machine Operators)....................... 12
Transactions Involving Manufacturer Representatives.................................. 13
Records Must Be Available for Inspection....................................................... 13
Documents Furnished with each Sale or Consignment of Tobacco
Products.................................................................................................................. 13
Documents Required for Transporting Tobacco Products in Michigan.....14
Shipping Tobacco Products to Locations Outside of Michigan (Exports).14
Applying for and Renewing a License.................................................................... 15
License Hearing Procedures.................................................................................... 16
Hearing Before a Representative of the Treasurer or Treasurer’s
Designee.................................................................................................................. 16.
Hearing Before a Hearing Referee.................................................................... 16
RETAILER SECTION
Administrative Inspections of Retailers (No License)....................................... 17
Recordkeeping Requirements........................................................................... 18-19
Invoices and Other Records............................................................................... 18.
Records Available for Inspection....................................................................... 18
Acquiring Tobacco Products............................................................................... 18
Transferring Tobacco Inventory Between Retail Locations.......................... 19.
Contraband............................................................................................................. 19
GENERAL/OTHER
Manufacturer Representatives................................................................................ 20
Sales of Single Cigarettes and Games of Chance................................................ 21
Audit............................................................................................................................. 22
Seizure Hearing Procedures.................................................................................... 23.
Demand for Hearing............................................................................................. 23.
Hearing.................................................................................................................... 23.
Decision................................................................................................................... 23
Treasury-Issued Rules, Bulletins and Other Guidance.................................24-25
Glossary of Terms................................................................................................ 26-28
Treasury Contact Information................................................................................ 28
Page 4 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019
Introduction
The Michigan TOBACCO PRODUCTS TAX ACT (TPTA) imposes NOTE: Products that do NOT
an excise tax on TOBACCO PRODUCTS, which is levied on the contain any tobacco, even
consumer of the tobacco products. In addition, it closely regulates the if they do contain nicotine,
purchase, acquisition, SALE, importation, transportation, exportation, are NOT subject to the tax
and distribution of tobacco products in, into, and/or from Michigan. imposed under (or otherwise
Because the TPTA imposes serious and significant consequences on regulated by) the TPTA. For
those who violate this law — including (but not limited to) seizures, civil more information, please see
penalties, criminal charges, and LICENSE suspension, revocation, denial, Letter Ruling 2015-3 at
or non-renewal — it is important to understand and follow the laws www.michigan.gov/taxes
and rules that apply when engaging in activities governed by the TPTA.
To assist LICENSEES, RETAILERS, and other PERSONS that may
engage in activities governed by the TPTA, TREASURY has prepared NOTE: Tax under the TPTA
this Information Guide. is generally precollected and
remitted by Wholesalers and
Tobacco tax laws and regulations are complex. For additional Unclassified Acquirers. Persons
information or if you have questions about the TPTA, you can check acting solely as retailers do not
Treasury’s tobacco tax website at www.michigan.gov/tobaccotaxes or need to be licensed and do
contact Treasury directly (see the Treasury Contact Information listed on not file tobacco tax returns or
page 28). remit tobacco tax.
Tax Rates
• CIGARETTES: $0.10 (10 cents) per individual stick. [MCL NOTE: Effective November
205.427(1)] The tax on cigarettes, therefore, is $2.00 per pack of 20 1, 2012 through October 31,
and $2.50 per pack of 25. 2021, the tax rate applicable to
• OTHER TOBACCO PRODUCTS (OTP): tax rate is 32% of the cigars is capped at $0.50
WHOLESALE PRICE. [MCL 205.422(bb); 205.427(1)(g)] (50 cents) per individual cigar
even if the calculated tax at
32% of the wholesale price is
greater than $0.50 (50 cents).
[MCL 205.427(1)(g)]
For more information, please
see Notice Regarding Premium
Cigars at
www.michigan.gov/
tobaccotaxes
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 5
Tobacco Products Tax Returns and Filing
LICENSEE Requirements
Tobacco Products Tax Returns are due on or before the twentieth
(20th) day of each calendar month. A return must be filed with Treasury
by every licensee other than a retailer, MANUFACTURER, or
NOTE: Michigan Tobacco VENDING MACHINE OPERATOR. In general, the return must
Products Tax Returns are filed state:
under penalty of perjury. (i) the wholesale price of each item of OTP purchased;
(ii) the quantity of cigarettes purchased;
(iii) the wholesale price charged for all OTP sold;
(iv) the number of INDIVIDUAL PACKAGES of cigarettes and the
number of cigarettes in those individual packages;
(v) the number and denominations of STAMPS affixed to individual
packages of cigarettes sold by the licensee for each PLACE OF
BUSINESS in the preceding month; and
(vi) the number and denomination of unaffixed stamps in the possession
NOTE: The due date for a of the licensee at the end of the preceding calendar month. [MCL
wholesaler to report and pay 205.427(2)]
the tobacco tax is triggered by
the sale of a tobacco product. Licensees that are WHOLESALERS must also report accurate
[MCL 205.427(1)]. inventories of cigarettes, both stamped and unstamped, at the end
of the preceding calendar month. Licensees that are wholesalers
and UNCLASSIFIED ACQUIRERS must also report accurate
The due date for an unclassified inventories of affixed and unaffixed stamps by denomination at the
acquirer to report and pay the beginning and end of each calendar month and all stamps acquired
tobacco tax is triggered by the during the preceding calendar month. Treasury may also require a
importation or acquisition of licensee to report cigarette acquisition, purchase, and sales information
a tobacco product in Michigan. in other formats and frequency. [MCL 205.427(2)]
[MCL 205.427(6)]. See also LR
2015-4. Treasury requires all Tobacco Product Tax Returns be submitted
electronically through the Michigan Motor Fuel and Tobacco System
(MiMATS).You may file using one of three methods through MiMATS
e-Services:
• Web Filing – Manual entry of your return directly in e-Services
• Excel Spreadsheet – An Excel spreadsheet can be uploaded to the
system
• XML File Format – Return data can be uploaded using XML format
For more information on filing, please see the MiMATS e-Services
instructions at www.michigan.gov/tobaccotaxes.
If you are both a licensed unclassified acquirer of OTP and a licensed
SECONDARY WHOLESALER of OTP, please see the Notice to AT/ST
Dual Licensees’ How to File Your Tobacco Tax Returns at
www.michigan.gov/tobaccotaxes.
Page 6 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019
Payments LICENSEE
Tobacco tax payments are required to be submitted electronically
within the Michigan Motor Fuel and Tobacco System (MiMATS). To
make payments, go to www.michigan.gov/tobaccotaxes and login to
e-Services. NOTE: Important guidance
as to who does (and does not)
constitute a “manufacturer” for
Payment Deadlines which a manufacturer license
Tobacco tax payments are due on the twentieth (20th) day of each is required under the TPTA
month following the reporting period. If payment is not received by can be found in the April 26,
Treasury by the due date, penalty and interest charges may be assessed 2018 decision by the Michigan
based on provisions of the Michigan REVENUE ACT [MCL 205.23, Supreme Court in the following
MCL 205.24]. case:
• People v Shami, 501 Mich 243
NOTE: If the twentieth (20th) of the month falls on a Saturday, Sunday
(2018)(Defendant constituted
or legal holiday, the next business day is considered the due date for
a "manufacturer" under
filing returns and making payments.
the TPTA by producing a
tobacco product when he
combined (mixed) two or
Licensing Requirement, License Types, more different tobaccos "to
License Fees give being, form, or shape" to
A PERSON may not purchase, possess, acquire for resale, or sell a a single, custom blend that
tobacco product as a manufacturer, wholesaler, secondary wholesaler, differed from the ingredient
vending machine operator, unclassified acquirer, TRANSPORTATION tobaccos).
COMPANY, or TRANSPORTER in Michigan without a license.
[MCL 205.423(1)] If a person acts in more than one (1) of these
capacities at any place of business, that person must obtain a license NOTE: The licensee or
for each capacity. [MCL 205.423(2)] A license is not assignable. [MCL retailer will be considered the
205.423(1)] "manufacturer" when blending
(mixing) of OTP occurs on
the business premises of the
License Types and Fees licensee or retailer regardless
Manufacturer – the fee for this license is $100. whether the blending is
conducted by an employee,
Wholesaler – may purchase TPTA tax unpaid and TPTA tax paid tobacco manager or owner of the
products. The fee for this license is $100. business or by the customer
purchasing the OTP.
Unclassified Acquirer – imports or acquires TPTA tax unpaid
cigarettes or OTP from a source other than a wholesaler or secondary
wholesaler for its own consumption, for sale to consumers or for NOTE: See Glossary of
sale to other businesses for resale. The unclassified acquirer can Terms section on pages 26-
purchase TPTA tax paid tobacco products for sale at retail. The fee for 28 for descriptions of what
an unclassified acquirer of cigarettes license is $100. The fee for an constitutes a manufacturer,
unclassified acquirer of OTP license is $10. secondary wholesaler, vending
machine operator, unclassified
acquirer, transportation
company, transporter and
more.
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 7
LICENSEE Secondary Wholesaler – purchases Michigan TPTA tax paid cigarettes
or OTP from a Michigan licensed wholesaler or unclassified acquirer and
sells the tobacco products to other businesses for resale. The fee for this
license is $25.
Vending Machine Operator – purchases Michigan TPTA tax paid
cigarettes or OTP and sells the tobacco products to consumers through
one or more vending machines. The fee for a vending machine operator
license is calculated as follows: $25 for the first vending machine plus
$6.25 for each additional vending machine.
Transportation Company – the fee for this license is $5.
Transporter – the fee for this license is $50. Please note: a permit is
required for each load, at $1/load. (See page 11 for more information.)
For information on how to apply for these licenses, see section titled
“Applying for and Renewing a License” on page 15.
Stamps, OTP Markings and Shipping
Labels
Cigarettes
• In general, cigarettes sold, offered for sale, or
possessed in Michigan must be stamped. Below are
specific rules regarding cigarettes:
Each individual package of cigarettes offered for
• sale in Michigan must have the Treasury authorized
stamp affixed to it (affixed = 90% or more of the
stamp on the individual package). [MCL 205.426(6),
MCL 205.426a(2)]
Wholesalers and unclassified acquirers must place
• (or cause to be placed) a stamp on the bottom of
each individual package of cigarettes to be sold in
Michigan before delivery, sale, or transfer to any
person in Michigan. [MCL 205.426a(2)]
Retailers and licensees (other than wholesalers
or unclassified acquirers) may not acquire an individual package of
cigarettes or a cigarette from an individual package for resale unless
that individual package has the Treasury authorized stamp affixed to it.
This prohibition does not apply to a person acting as a transporter for
a wholesaler or unclassified acquirer. [MCL 205.426a(3)]
• Retailers and vending machine operators may not sell (or offer
for sale) an individual package to the public that does not have the
Treasury authorized stamp affixed to it. An individual package of
cigarettes without a stamp may not be placed or stored in a vending
machine. [MCL 205.426a(4)]
Page 8 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019
• The Treasury authorized stamp may only be affixed to those cigarette
brands (or brand families) that are manufactured by PMs and NPMs LICENSEE
listed on Treasury’s PM or NPM Directory available at www.michigan.
gov/taxes/0,4676,7-238-43519_43547-470540--,00.html. [MCL
205.426a(2), (11)] NOTE: Requirements for
• A STAMPING AGENT may not affix a stamp to any package of reporting, possessing and
cigarettes of an NPM if the NPM is not listed on the NPM Directory returning unstamped cigarette
or after receiving notice that the NPM has not prepaid or paid in full inventory or stamps can be
the equity assessment imposed under MCL 205.426d(6). Additional found in Rule 2 (R 205.452).
requirements applicable to stamping agents can be found in Rule 4
(R 205.454). A person seeking to become a stamping agent must
complete and submit a Stamping Agent Agreement (Form 3371). NOTE: Each original
manufacturer shipping case of
Non-Cigarette Tobacco Products (OTP) OTP is not required to have
either prescribed marking
Unlike cigarettes, individual items of OTP are not required to have a tax (e.g., name and address of
stamp affixed or bear a Treasury authorized marking. However, certain first purchaser in Michigan
cases, boxes and containers containing OTP must bear the “proper” or marking applied with the
marking required by Treasury. The “proper” marking may take the form Treasury authorized OTP
of the name and address of first purchaser in Michigan (e.g., a shipping roller/hand stamp) while being
label) or the marking applied by the Treasury authorized OTP roller/ transported into Michigan so
hand stamper depending on the circumstances. Below are specific rules long as the case is not received
regarding OTP: or acquired in Michigan by the
licensee. Therefore, labeling
a) Shipping Cases, Boxes, or Containers of OTP Generally or marking the shrink-wrap
Every shipping case, box or container of OTP found in a place of or other material covering
business or otherwise in the possession of a retailer, secondary a pallet or group of these
wholesaler, transporter, unclassified acquirer, vending machine operator, cases is acceptable. However,
or wholesaler must bear the “proper” marking required by Treasury once received or acquired in
except as otherwise explained below. [MCL 205.426(6)]. Michigan by the licensee, each
original manufacturer shipping
b) Original Manufacturer Shipping Cases of OTP case must bear either of the
Each original manufacturer shipping case of OTP that is received or markings described above or it
acquired in Michigan by a wholesaler, secondary wholesaler, vending will be in violation of the TPTA;
machine operator, unclassified acquirer, or retailer must bear at least 1 regardless whether there is a
of the following “markings” [MCL 205.426(6)]: marking on the shrink-wrap
• Name and address of the person making the first purchase in Michigan or other material covering the
(e.g., a shipping label), or pallet or group of these cases.
• The “marking” applied by the Treasury authorized OTP roller/hand Whether a case is deemed
stamper. to be received or acquired
in Michigan will be based
Licensed wholesalers and unclassified acquirers typically receive OTP on the particular facts and
in original manufacturers’ shipping cases directly from manufacturers circumstances. Relevant factors
or unlicensed out-of-state distributors. Once an original manufacturer’s include, but are not limited
shipping case of OTP is received or acquired in Michigan, these to, ownership of the cases at
wholesalers and unclassified acquirers MUST affix the marking applied the time they enter Michigan,
by the Treasury authorized OTP roller/hand stamper to each original the risk of loss, and the use of
manufacturer’s shipping case if it does not already bear the name and a common carrier versus the
address of the first purchaser in Michigan. If an original manufacturer’s licensee's own vehicle.
shipping case is purchased or otherwise acquired by a secondary
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 9wholesaler or retailer from a licensed wholesaler or unclassified
LICENSEE acquirer, the shipping case must bear one of the above markings or it
will be presumed to be contraband and subject to seizure and forfeiture
as explained on pages 12 and 19 of this Information Guide.
NOTE: A retailer may possess c) Other Shipping Cases, Boxes or Containers of OTP
other shipping cases, boxes Wholesalers and unclassified acquirers typically ship OTP to their
or containers of OTP that customers (e.g., secondary wholesalers, vending machine operators, and
do not bear the Treasury retailers) in smaller cases, boxes, or containers after the OTP has been
approved marking so long as broken down from the original manufacturers’ shipping cases. Before
the OTP was purchased or shipping any such case, box, or other container of OTP (regardless
otherwise acquired from a whether a case, box, or container also contains other (non-tobacco)
licensed secondary wholesaler items), each must be marked by the wholesaler or unclassified acquirer
and the retailer maintains the using the Treasury authorized OTP roller/hand stamper.
records required by the TPTA
to substantiate the purchase or Secondary wholesalers may further break down cases, boxes, or
acquisition of the OTP. containers purchased or received from wholesalers and unclassified
acquirers into other cases, boxes, or containers for their customers
(e.g., retailers). Because secondary wholesalers are not permitted to
possess or use the Treasury authorized OTP roller/hand stamper, OTP
shipped in these cases, boxes, or containers by secondary wholesalers
to their customers will NOT bear any markings. Accordingly, as long
as the customer (e.g., retailer) purchased or acquired these unmarked
cases, boxes, or containers from a licensed secondary wholesaler and
maintains the proper invoices and other records required by the TPTA
to substantiate the purchase or acquisition, the unmarked cases, boxes,
or containers will not be considered contraband and will not be subject
to seizure or forfeiture.
See Application for Non-Cigarette Tobacco Products Stamp (Form
323 regarding the Treasury authorized OTP roller/hand stamper) and
Internal Policy Directive 2006-11 for more information:
www.michigan.gov/documents/treasury/ipd2006-11_179402_7.pdf. See
also Value, Inc v Dep't of Treasury, 320 Mich App 571 (2017).
Vending Machine Disc or Marker
Each vending machine containing a tobacco product for sale must have
the Treasury authorized disc or marker attached to the front of the
vending machine (and visible to the public). [MCL 205.423(5)]
Page 10 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Administrative Inspection of Licensees LICENSEE
Inspectors will present their State of Michigan identification and business
card to the contact person of the establishment. They will explain
the reason for the inspection, the process that will be followed, and
the items that they will need to see inside the business, including (if
applicable) but not limited to:
• The previous four (4) years of tobacco product invoices
• TPTA license
• Sales tax license
• Identification of business contact person
• All tobacco products
• Signage indicating sales to minors are prohibited
• Cigarette stamp inventory
Administrative inspections will occur during the licensee’s regular NOTE: For licensees, "regular
business hours and will not be pre-scheduled or otherwise announced business hours" refers to
in advance. The inspection process is permitted by law without a search the Hours of Operation listed
warrant or court order and may not be prevented or hindered. [MCL on Part 1 of the licensee's
205.426a(5), (7)] license application and any
additional hours which may
All tobacco products associated with the business must be presented be displayed on the licensee's
for inspection including tobacco products held in storage areas inside or signage, advertisements or other
outside of the business, vehicles, and residences. information communicated to
the general public.
Invoices and other records (see page 12 for a description of the invoices
and other records) must be presented for the purpose of supporting the
purchase or acquisition of the tobacco products for the business over
the past four (4) years. These invoices and records must be located at NOTE: Inspectors will be
the business and immediately accessible at the time of inspection. It is a looking for overall compliance
violation of the TPTA for a licensee to not have these invoices with the TPTA. This may
on site and available for inspection. include (but is not limited
to) the following prohibited
The “ship to” address on the invoices must match the physical location actions (unless licensed as a
where the tobacco products are being stored or offered for sale.
manufacturer):
Tobacco shipping cases, containers, and boxes will be inspected for • The mixing or blending of
proper markings and, where appropriate, shipping labels. Individual tobacco products to create a
packages of cigarettes and cartons will also be inspected to ensure new product.
stamps are affixed to the individual packages of cigarettes. • The use of cigarette making
machines, including for
For licensees that are unclassified acquirers, the inspector may bring demonstration purposes.
the monthly tobacco tax returns filed by the licensee to assist in the
inspection. The invoice information will be compared to these tobacco
tax returns. This process may occur at the business or the records may
be removed from the business for further examination.
The Treasury authorized OTP roller (hand stamper) assigned to the
licensee will be inspected.
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 11Contraband
LICENSEE A tobacco product held, owned, possessed, transported, or in control
of a person in violation of the TPTA, and a vending machine, vehicle,
and other tangible personal property containing a tobacco product in
violation of the TPTA and any related books and records are contraband
and may be seized and confiscated by Treasury. [MCL 205.429(1)]
The seizure and forfeiture of a tobacco product or other property does
not relieve a person from a fine, imprisonment, or other penalty for
violation of the TPTA. [MCL 205.429(6)]
Recordkeeping Requirements
Invoices and Other Records (General)
Manufacturers, secondary wholesalers, transportation companies,
unclassified acquirers, vending machine operators, and wholesalers
must keep a complete and accurate record of each tobacco product
manufactured, purchased, or otherwise acquired. For secondary
wholesalers, transportation companies, unclassified acquirers,
vending machine operators, and wholesalers these records must
include a written statement containing all of the following [MCL
205.426(1)]:
• Name and address of both the seller and purchaser
• Delivery date
• Quantity of each tobacco product
• Trade name or brand of each tobacco product
• Price paid for each tobacco product purchased or acquired
Invoices and Other Records (Vending Machine
Operators)
Vending machine operators must keep a detailed record of each vending
machine owned for the sale of tobacco products containing all of the
following information [MCL 205.426(3)]:
• Location of each vending machine
• Date the vending machine was placed on the location
• Quantity of each tobacco product placed in each vending machine
• Date when tobacco products were placed in each vending machine
• Amount of the commission paid or earned on sales through each
vending machine
When filling or refilling a vending machine, vending machine operators
must deliver a written statement to the owner or tenant occupying the
premises where a vending machine is located with all of the following
[MCL 205.426(3)]:
• Name and address of vending machine operator and name and address
of owner or tenant
• Date when vending machine was filled (or refilled)
• Quantity of each brand of tobacco product sold from the vending
machine since the date when the tobacco products were last placed in
the vending machine.
Page 12 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Transactions Involving Manufacturer Representatives
Representatives of licensed manufacturers must provide each licensee
LICENSEE
(wholesaler, secondary wholesaler, vending machine operator, or
unclassified acquirer) with an invoice when exchanging tobacco products
or otherwise engaged in transactions with that licensee involving
tobacco products. This record must show:
(i) the quantity and identity of the tobacco products received by the
licensee;
(ii) detail whether exchanged, received, removed, or otherwise disposed
of; and
(iii) the identity of the licensee involved.
This invoice must be retained by the licensee in the same place and for
the same period of time as other records required by the TPTA. [MCL
205.428(2)]
Records Must be Available for Inspection
A licensee must keep the written statement described above (as NOTE: A licensee is not
applicable to that license type) AND a true copy of all purchase orders, in compliance with these
invoices, bills of lading, and other written matter substantiating the recordkeeping requirements
purchase or acquisition of each tobacco product at the location where if the records are kept offsite,
the tobacco products are stored or offered for sale. These records must such as in the custody of an
be preserved for a period of four (4) years from the date of acquisition accountant (or other agent), or
or purchase and offered for inspection at any time upon oral or written retained solely by the licensees’
demand by Treasury or its authorized agent. Treasury may require other vendor.
documents to be retained by a licensee. [MCL 205.426(1), (5)]
TIP: Treasury may, by prior
Documents Furnished with each Sale or Consignment written approval, allow a
of Tobacco Products licensee to maintain records
Manufacturers, secondary wholesalers, unclassified acquirers, and in a different manner. [MCL
wholesalers must deliver (and retain a duplicate) with each sale or 205.426(1)]
consignment of a tobacco product a written statement containing all of
the following information [MCL 205.426(2)]:
NOTE: Maintaining documents
• Name (or trade name) and address of both the seller and purchaser
in an electronic format (rather
• Delivery date
than paper) may be acceptable
• Quantity of each tobacco product
as a “true copy” for purposes
• Trade name or brand of each tobacco product
of the TPTA provided the
• Price paid for each tobacco product purchased or acquired.
documents can be delivered
(either by printing out on paper
or by electronic transfer - e.g.,
email or thumb drive) to the
inspectors upon request. Having
the information available only
on a screen for viewing by the
inspectors does not comply
with the TPTA.
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 13Documents Required for Transporting Tobacco
LICENSEE Products in Michigan
Transporters or other licensees must have in their actual possession bills
of lading or invoices containing all of the following when transporting,
NOTE: An individual acting possessing, or acquiring for purposes of transporting, a tobacco product
as a transporter is required to on Michigan roads, highways, or streets [MCL 205.426(7)]:
be licensed as a transporter. • Name (or trade name) and address of both the seller and purchaser
An employee must have, in his • Delivery date
or her possession, a copy of • Quantity of each tobacco product
their employer's transporter or • Trade name or brand of each tobacco product
other appropriate TPTA license • Price paid for each trade name or brand in the transporter’s (or other
when transporting, possessing licensee’s) possession or custody
or acquiring for the purpose • Copy of the transporter’s (or if other licensee, licensee’s) TPTA license
of transporting, a tobacco • Permit issued by Treasury (transporters only). See MCL 205.426(8) for
product on a Michigan road or details regarding this permit.
highway, or the employee will
be considered an unlicensed Shipping Tobacco Products to Locations Outside of
transporter in violation of the Michigan (Exports)
TPTA.
Licensees located in Michigan who ship (export) tobacco products to
locations outside Michigan must place the name and address of the
consignee or purchaser to whom the shipment is made outside Michigan
on each shipping case or other container in which the tobacco product
is shipped. [MCL 205.426(6)]
NOTE: Labeling or marking
shrink-wrap or other material
covering a pallet or group of
cases or containers (rather
than on each individual case or
container) does not satisfy this
requirement.
Page 14 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Applying for and Renewing a LICENSEE
License
To obtain a license for the first time, an applicant must register and
submit an online application in the Michigan Motor Fuel and Tobacco
System (MiMATS) through the e-Services link and demonstrate the T required
following (through satisfactory proof as determined by Treasury): A license is NO
acts solely
• The applicant’s financial responsibility including, but not limited to, a when a person
of a retailer.
minimum net worth of $25,000.00. in the capacity
• The applicant owns, or has an executed lease for, a secure
nonresidential facility for the purpose of receiving and distributing
cigarettes and/or OTP and conducting its business. If the applicant
carries on another business in conjunction with the secure
nonresidential facility, the other business shall also be identified.
• United States citizenship or eligibility to obtain employment within the
United States if not a citizen. If the applicant is not an individual, the
controlling shareholders, partners, directors, and principal officers shall
be United States citizens or eligible to obtain employment within the
United States if not a citizen.
NOTE: An applicant for a
A checklist and instructions are available to help complete the license may be subject to a pre-
application. Additional forms and documentation are required to be license inspection performed by
submitted with the completed application. Please see www.michigan. the Michigan State Police prior
gov/tobaccotaxes for more information. to the approval or issuance of a
license.
A TPTA license is issued by location therefore a licensee with two or
more locations needs a TPTA license for each location. A TPTA license is
not assignable and expires annually thus requiring licensees to complete
and submit an application each year. The license year begins on July 1 and NOTE: A secondary wholesaler
ends on June 30. must maintain an established
place of business in Michigan
In order to continue operating as a licensee into the new license year, an where the tobacco products are
application and fee for renewal are required to be submitted to Treasury received, stored and available for
by June 30 each year. If the application is not submitted to Treasury by sale and for inspection purposes
June 30, a person will be unable to operate as a licensee (beginning July during regular business hours.
1) until a new license is issued. A NEW application must be submitted
and will be subject to additional requirements.
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 15LICENSEE License Hearing Procedures
Treasury may suspend, revoke, or refuse to issue or renew a license for
failure to comply with the TPTA or “for any other good cause.” [MCL
205.425(1)] Hearing procedures involving a suspension, revocation, or
refusal to renew a license are set forth under MCL 205.425 and are
summarized below:
Hearing Before a Representative of the Treasurer or
Treasurer’s Designee
Before Treasury suspends, revokes, or refuses to renew a license,
Treasury is required to notify the person of its intent to hold a hearing
before a representative of Treasury to determine whether to suspend,
revoke, or refuse to renew the license at least fourteen (14) days before
the scheduled hearing date.
Hearing Before a Hearing Referee
A person aggrieved by the suspension, revocation, or refusal to issue or
renew a license may apply to Treasury's Hearings Division for a hearing
within twenty (20) days after notice of the suspension, revocation, or
refusal to issue or renew the license. A hearing is then held by a Hearing
Referee in the same manner as provided in MCL 205.21.
For a suspension, revocation, or refusal to renew a license, the Decision
of the Administrator of the Hearings Division is required to be issued
within forty-five (45) days of Treasury’s receipt of the request for
hearing. An appeal can be taken as allowed by law.
Page 16 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Administrative Inspection of RETAILER
Retailers (No License)
Inspectors will present their State of Michigan identification and business NOTE: Important guidance as
card to the employee contacted at the retail location. They will explain to who is considered a “retailer”
the reason for the inspection, the process that will be followed, and the under the TPTA can be found in
items that they will need to see inside the business, including: the published decisions by the
• Tobacco product records for the previous four (4) months Michigan Court of Appeals in
• Sales tax license the following cases:
• Identification of business contact person People v Assy, 316 Mich App 302
• All tobacco products (2016)
• Signage indicating sales to minors are prohibited
People v Shami, 318 Mich App
Administrative inspections will occur during the retailer’s regular 316 (2016)
business hours and will not be pre-scheduled or announced in advance.
The inspection process is permitted by law without a search warrant or NOTE: A retailer's regular
court order and may not be prevented or hindered. [MCL 205.426a(6)(7)] business hours are those hours
the retailer is open for business
Tobacco product invoices and other records required by the TPTA as evidenced by the retailer's
covering the four (4) month period must be located on the site of the commercial activity and signage,
business and made available immediately at the time of the inspection. advertisements or other
Retailers must also have the ability to provide copies of the invoices and information communicated to
records to the inspectors upon request. the general public.
The inspection process requires that the inspectors be provided access
to all areas of the business for the following purposes:
• Determine if the invoices support the tobacco products in the store
and conduct a reverse inventory to ensure that all of the tobacco
products are substantiated by invoices.
• Check that the “Ship To” address on each invoice matches the physical
location of the tobacco product.
• Verify that the invoices (and other required records) are from an
appropriate licensee to ensure that the TPTA tax has been paid.
• Ensure that individual packages of cigarettes are properly affixed with a
valid, Treasury-authorized stamp.
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 17RETAILER Recordkeeping Requirements
Invoices and Other Records
Retailers must keep a complete and accurate record of each tobacco
product purchased or otherwise acquired. These records must include a
written statement containing all of the following [MCL 205.426(1)]:
• Name and address of both the seller and purchaser
• Delivery date
• Quantity of each tobacco product
• Trade name or brand of each tobacco product
• Price paid for each tobacco product purchased or acquired
Records Available for Inspection
NOTE: A retailer may keep its A retailer must keep the written statement described above AND
records relating to purchases a true copy of all purchase orders, invoices, bills of lading, and other
or acquisitions older than four written matter substantiating the purchase or acquisition of each
(4) months off-site, including tobacco product at the location where the tobacco products are stored
with the retailer’s accountant or or offered for sale for a period of four (4) months from the date of
other agent. However, a retailer acquisition or purchase. Records must be preserved for a period of
is not in compliance with these four (4) years from the date of acquisition or purchase and offered for
recordkeeping requirements if inspection at any time upon oral or written demand by Treasury or its
the records allowed to be kept authorized agent. [MCL 205.426(1), (5)]
off-site are not in the custody of
the retailer, it’s accountant (or Acquiring Tobacco Products
other agent), or retained solely
Retailers, except those that also maintain an appropriate license (e.g.,
by the retailer’s vendor.
unclassified acquirer - retail importer of cigarettes or OTP), must
purchase all of their tobacco products from a source that has a valid
TIP: Treasury may, by prior TPTA license to ensure that all tobacco taxes have been pre-paid.
written approval, allow a Licensed sources include: wholesalers, secondary wholesalers, and
retailer to maintain records unclassified acquirers. Each retailer is encouraged to contact Treasury to
in a different manner. [MCL verify each source has a valid license.
205.426(1)]
A retailer may not purchase, receive or solicit a sale of a tobacco
product to be shipped, mailed or otherwise sent or brought into
NOTE: Maintaining documents Michigan (including internet-based purchases) unless the retailer also
in an electronic format (rather holds an unclassified acquirer license or the tobacco products are sold
than paper) may be acceptable through a licensed wholesaler or unclassified acquirer. [MCL 205.423(1),
as a “true copy” for purposes 205.431(1)]
of the TPTA provided the
documents can be delivered There are sources located outside of Michigan that have been issued
(either by printing out on paper a license to sell tobacco products to businesses in Michigan. These
or by electronic transfer - e.g., purchases may be delivered via ground transportation. Contact Treasury
email or thumb drive) to the to determine if a source has such a license.
inspectors upon request. Having
the information available only A representative of a licensed manufacturer must provide the retailer
on a screen for viewing by the with an invoice when exchanging a tobacco product. This record must
inspectors does not comply show: (i) the quantity and identity of the tobacco product received
with the TPTA. by the retailer; (ii) detail whether exchanged, received, removed, or
Page 18 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019otherwise disposed of, and (iii) the identity of the retailer involved.
This invoice must be retained by the retailer in the same place and for RETAILER
the same period of time as other records required by the TPTA. [MCL
205.428(2)]
Transferring Tobacco Inventory Between Retail
Locations
Tobacco products purchased for a specific retail location for resale
may not be transferred to other retail locations (i.e., those with a
different physical address) even if all locations have the same owner. A
license (e.g., secondary wholesaler, unclassified acquirer, wholesaler, or
transporter) is required to transfer products between retail stores with
different physical addresses.
NOTE: A person (other than
Contraband a licensee) who is in control or
A tobacco product held, owned, possessed, transported, or in control possession of a tobacco product
of a person in violation of the TPTA, and a vending machine, vehicle, in violation of the TPTA (e.g., an
and other tangible personal property containing a tobacco product in individual package of cigarettes
violation of the TPTA and any related books and records are contraband without a stamp), or offers
and may be seized and confiscated by Treasury. [MCL 205.429] to sell or does sell a tobacco
product for purposes of resale
The seizure and forfeiture of a tobacco product or other property does without the requisite license is
not relieve a person from a fine, imprisonment, or other penalty for personally liable for the TPTA
violation of the TPTA. [MCL 205.429(6)] tax plus a penalty of 500% of the
amount of the TPTA tax due.
[MCL 205.428(1)]
See Vulic v Dep’t of Treasury, 321
Mich App 471 (2017).
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 19Manufacturer Representatives
The TPTA allows for certain activities concerning the possession and
sale, exchange, or other disposition of tobacco products in Michigan
by a person that is a representative of a licensed manufacturer. [MCL
205.428(2)] Below are the TPTA’s requirements applicable to such
representatives:
NOTE: A representative is • Treasury may permit a representative whose duties require travel in
guilty of a felony, punishable by a Michigan to transport up to 138,000 cigarettes, of which not more
fine of not more than $5,000.00 than 36,000 cigarettes may bear no tax indicia or the tax indicia of
or imprisonment for not more another state.
than five (5) years, or both, if • The total value of OTP carried by a representative shall not exceed a
they do any of the following in wholesale value of $5,000.00.
Michigan: • A manufacturer must notify Treasury of the manufacturer’s
representatives that it currently employs who carry cigarettes or OTP
• Sell, exchange, or otherwise
in performing work duties in Michigan.
dispose of cigarettes or OTP
• The manufacturer shall maintain a record of each transaction by
that do not bear the stamp
the manufacturer’s representative for a period of four (4) years
or other marking required by
immediately following the transaction and shall produce the records
Treasury, and/or
upon request of Treasury or Treasury’s authorized agent.
• Sell, exchange, or otherwise
• Each record shall identify the quantity and identity of the tobacco
dispose of cigarettes or OTP
products, detail whether exchanged, received, removed, or otherwise
bearing the tax indicia of
disposed of and the identity of the retailer, wholesaler, secondary
another state.
wholesaler, vending machine operator, or unclassified acquirer involved.
[MCL 205.428(2)]
The representative must provide a copy of the record to the retailer,
wholesaler, secondary wholesaler, vending machine operator, or
unclassified acquirer at the time of the exchange or disposal.
• A representative may not, within Michigan, exchange or otherwise
dispose of tobacco products bearing the tax indicia of another state or
receive tobacco products bearing the tax indicia of another state from
retailers located in Michigan.
In addition to the statutory provisions of the TPTA, Rule 3 (R 205.453)
provides that manufacturer representatives may legally possess individual
packages of cigarettes if the Tobacco Manufacturer’s Representative
Permission List (Form 4857) is submitted to Treasury.
A manufacturer must promptly notify Treasury when the manufacturer’s
representative is no longer employed by the manufacturer or when
there is any change in any representative’s territory in Michigan, name,
address, telephone number, or vehicle make, model, or license number.
[R 205.453]
Page 20 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Sales of Single Cigarettes and Games of
Chance
Federal law and regulations prohibit a retailer from selling single
cigarettes (“loosies”): NOTE: More information is
• Federal regulations at 21 CFR 1140.14 provide that "no retailer available at the U.S. Department
may break or otherwise open any cigarette . . . package to sell or of Treasury, Alcohol and Tobacco
distribute individual cigarettes or a number of unpackaged cigarettes Tax and Trade Bureau, FAQS
that is smaller than the quantity in the minimum cigarette package www.ttb.gov/tobacco/
size defined in 1140.16(b) . . . ." The minimum cigarette package size is tobacco-faqs.shtml#t17
generally 20 per 1140.16(b). A "retailer" is defined for purposes of this
regulation as "any person who sells cigarettes or smokeless tobacco to
Also see 27 CFR part 40
individuals for personal consumption, or who operates a facility where
vending machines or self-service displays are permitted under Part
1140." NOTE: Under MCL 722.642a,
• Michigan law provides that a person shall not possess or sell a tobacco a person who sells tobacco
product that violates any Federal law or regulation and that a product products at retail and sells a
that does not comply with Federal law or regulation is subject to cigarette separately from its
seizure. Therefore the sale of single cigarettes is a violation of the package could be subject to a
TPTA. [MCL 205.14] misdemeanor charge, punishable
by a fine of not more than $500
The TPTA prohibits a person from using a device or game of chance to for each offense.
aid, promote or induce sales or purchases of a tobacco product or give
a tobacco product in connection with a device or game of chance. [MCL
205.426(4)]
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 21Audit
NOTE: Audit resources In general, the TPTA is administered by Treasury under the Revenue
including Taxpayer Rights During Act. [MCL 205.433(1)] Section 3(a) of the Revenue Act [MCL 205.3(a)]
an Audit and Audit Standards for authorizes the examination of the books and records of a taxpayer to
Field Audits can be found at determine if the correct tax was reported and paid.
www.michigan.gov/taxes
/0,4676,7-238-74531_43524-- A confirmation letter will be sent giving notification that an AUDIT
-,00.html will be performed. Included in the letter will be instructions on how to
obtain the Taxpayer Rights During an Audit brochure (Form 2315).
Treasury auditors are professionals, familiar with the application of
Michigan tax law in the business environment. The auditor assigned to
an audit will conduct a fair and impartial examination of the taxpayer’s
records. While the audit is in progress, the auditor will answer any
questions that may arise.
When the audit is finished, the auditor will explain the audit findings
and the alternatives available to the taxpayer if the taxpayer disagrees
with the audit results. The Revenue Act requires taxpayers to furnish all
records requested by the auditor that are necessary for performing a
fair and impartial audit.
Page 22 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019Seizure Hearing Procedures
Demand for Hearing
NOTE: The twenty (20) day
After property (contraband) has been seized, any person claiming period for filing an appeal
an interest in the seized property may file a demand for a hearing to commences upon sending of
determine if the property was lawfully subject to seizure and forfeiture. the decision to the person or
A demand for hearing must be filed with Treasury's Hearings Division persons claiming an interest in
within ten (10) business days after the date of service of the Notice of the seized property. Treasury
Seizure and Inventory Statement of Property Seized. If a timely demand is not required by law to
for hearing is not made or if it fails to comply with the requirements send a copy of the decision
of MCL 205.429(3), the property seized is considered forfeited to the to an attorney or other
State of Michigan by operation of law and may be destroyed or sold by representative of the person(s)
Treasury. challenging the seizure. See
K&W Wholesale, LLC et al v Dep’t
Hearing of Treasury, 318 Mich App 605
Upon receipt of a demand for hearing, Treasury is required to hold the (2017)
hearing within fifteen (15) business days. The case will be assigned to
a Hearing Referee and Treasury’s Hearings Division will mail a Notice
of Hearing that includes the date and time of the hearing along with
instructions for how to participate in person or by telephone. The
hearing is conducted in an informal manner that facilitates the exchange
of information needed to determine whether the property is subject to
seizure and forfeiture or is to be returned.
At the hearing before Treasury, the person who demanded the hearing
is entitled to be represented by an attorney or other person, to present
testimony and argument, and may submit a presentation in the form of
a brief or a written statement that contains the facts, a discussion of the
relevant law, and the legal arguments in favor of the person’s position.
After reviewing the testimony, evidence, and written submissions, the
Hearing Referee will prepare a written Recommendation to Treasury.
Decision
Treasury, acting through the Administrator of the Hearings Division, NOTE: Failure to make a timely
is required to issue its decision, in the form of a Decision and Order of appeal to the appropriate circuit
Determination, in writing within ten (10) business days of the hearing court will result in the seized
and shall either declare the seized property subject to seizure and contraband being forfeited to
forfeiture, or declare the property must be returned in whole or in part. the state. [MCL 205.429(4)]
This decision will be sent by registered mail and will be accompanied
by a notice of appeal rights. Appeals must be commenced in the circuit
court of the county where the seizure took place within twenty (20)
days of Treasury sending the decision to the interested person(s). [MCL
205.429(4)] See also Prime Time Int’l Distrib, et. al. v Dep’t of Treasury, 322
Mich App 46 (2017).
August 2019 • Michigan Department of Treasury Michigan Tobacco Tax Information Guide • Page 23Treasury-Issued Rules, Bulletins and Other Guidance
Administrative Rules • LR 2013-1 (Operating Cigarette Other Guidance and
(R205.451 through Making Machines Through Resources
Private, Nonprofit Clubs
R205.455) • Master Settlement Agreement
Located in Non-Commercial
• R 205.451: Definitions (MSA)/NPM Enforcement
Settings to Produce, Roll
• R 205.452: Prescribed markings • MSA and NPM Enforcement
or Generate Cigarettes in
on cigarette boxes and shipping Information and Requirements
Michigan)
cases; resale and refund of • NPM Filing Deadlines for
• LR 2002-05 (Gratis Cigarettes)
returned cigarettes Escrow and Equity Assessment
• R 205.453: Manufacturers’ • Equity Assessment Prepayment
Notices Requirement
representatives; permissions;
limitations • Notice to Stamping Agents re: • Equity Assessment Notice to
• R 205.454: Stamping agents; Implementation of Digital Tax NPMs
permissions; limitations Stamps in Michigan (Feb 2014) • List of Manufacturers
• R 205.455: Rescission • Notice Regarding Premium Authorized to Sell Cigarettes
Cigars (Effective Nov 1, 2012) or Roll-Your-Own (RYO) in
• Notice re: 2012 PA 188 and Michigan
Audit Standards for Field
Cigarette Making Machines (July • Nonparticipating Manufacturer
Audits 2012) (NPM) Directory
• Rules 205.2001-205.20111 • Special Notice to OTP • Participating Manufacturer (PM)
Wholesalers, Secondary Directory
Frequently Asked Wholesalers, and Unclassified
Questions (FAQ) on Acquirers re: Blunt Wraps (June Revenue Administrative
Tobacco Tax 2012) Bulletins (RABs)
• Notice re: Brand Identification
• See www.michigan.gov/ on Shipping Papers and Invoices • RAB 2009-2 (Tobacco Products
tobaccotaxes (Oct 2006) Tax, Secondary Wholesaler
• Notice to AT/ST Dual Licensees’ Licensure)
Internal Policy Directives How to File Your Tobacco Tax
(IPDs) Returns To view the "Notices," "Other
• Prevent All Cigarette Tracking Guidance and Resources" as
• IPD 2006-11 (TOBACCO well as additional information,
PRODUCTS TAX - OTP (PACT) Act Background and
Notice visit www.michigan.gov/
SEIZURE) tobaccotaxes
• Consumer Warning Notice re:
Internet Tobacco Purchases (for
Letter Rulings (LRs) Retailers)
• LR 2015-4 (Tobacco Tax • Notice to Licensed Wholesalers
Payment Requirements for and Unclassified Acquirers of
Unclassified Acquirers) Cigarettes and OTP re: MSA
• LR 2015-3 (Non-Tobacco
Products with Nicotine and the
TPTA)
Page 24 • Michigan Tobacco Tax Information Guide Michigan Department of Treasury • August 2019You can also read
